Wal-Mart Forces Food Suppliers to Keep Prices Down
I have to give Wal-Mart thumbs up for its efforts to keep the cost of food down in its stores by putting the pressure back on its vendors.
According to Fortune Magazine, Wal-Mart has been using its buying power to influence food suppliers to reduce prices by cutting costs in design, production and shipping. The savings have been passed onto the shopper with Wal-Mart reducing prices by as much as 30 percent on several hundred food products.
Greener, Smaller and Less-Costly Solutions
Supply chain cutbacks include Wal-Mart appealing to food companies to package items in smaller boxes. In the past, the "bigger the better" boxes have been stuffing Wal-Mart's shelves because of the food industries' strategy that shoppers will spot the big boxes over the smaller boxes, plus require more shelf space from the grocery stores to house the products.
As solution to big-box over-crowding and expense, Wal-Mart has promised its vendors that they will keep the same amount of shelf space if they go with smaller packaging. As a result, less paper fiber is being used and food makers are seeing a reduction in the transportation costs of getting the food products to the stores.
Fortune Magazine used the example of General Mills success of changing to smaller packaging. The company changed the size and shape of its Hamburger Helper pasta in order to package the same amount as before, but in a box that is 20 percent smaller. "The change has saved 890,000 pounds of paper fiber and eliminated 500 trucks from the road, giving General Mills a cushion to absorb some of the rising costs," says Fortune Magazine writer, Suzanne Kapner.
Going Straight to the Source
Other efforts to keep food costs down in Wal-Mart stores includes buying directly from the growers of certain products instead of utilizing suppliers who go to the same growers then turn around and sell the products to Wal-Mart.
Also, Wal-Mart has begun buying more products locally to reduce transportation costs. An example of this is seen in Wisconsin where 56 stores in and around Wisconsin are selling yellow corn grown by farmers in that state. Such efforts not only save Wal-Mart in transportation costs, but it could also help offset complaints that Wal-Mart stores drain local economy.
The Little Guy
Wal-Mart's effort to keep prices down and even reduce prices on many of its popular food items seems to be hurting the small suppliers the most. Smaller suppliers do not have many places to turn to reduce its prices and are ultimately absorbing the loss of not passing along their higher costs to shoppers.
The Bottom Line
It would benefit other grocery store chains to force companies to trim the fat from their production and transportation costs in order to keep consumer prices down. I'm not ignoring the fact that some of the fat-trimming could result in lost jobs along the way, but if people keep cutting back on how much they spend at the grocery store, someone's job will be lost regardless, and if this plan helps keep the cost of food down, I'm all for it.
Besides, I like the smaller packaging. My pantry has limited space and big boxes filled with air is environmentally irresponsible, not to mention a pain to lug from my car to the inside of my house. If If I had a vote, going with smaller packaging makes a lot of sense financially and in practicality.
Read More: Wal-Mart puts the squeeze on food costs
Comments
WalMart forces some honest suppliers out of business, forces others to offer inferior products to meet their demands, and makes the tax payer pick up the tab on their employees so that the heirs of Sam Walton can make up 5 of the 10 richest people in the world. You sure pick funny people to admire. WalMart has lowered the standards in every way in this country, and NOT FOR THE BETTER.
I wholeheartedly agree with Vickie and, as a matter of personal conviction, choose NOT to patronize WalMart. Sam Walton would be dismayed to see how his company currently does business. I plan my menu by what’s on sale, use coupons with the help of the terrific Web site www.couponmom.com, and buy higher quality groceries at a lower price than if I had shopped at WalMart.
I am not in Love with Wal-Mart but they are good at what they do. They do stand behind what they sell, and over all they are good guy to shop with.
Interestingly, our local Wal-Mart has much higher food prices than other local grocery stores. Could this be because the other stores are regional and already use local suppliers so they do not have to pay as much for transport? Or is it merely an effort by these companies to undercut Wal-Mart prices? It seems that providing zero benefits for their employees and putting local mom and pop stores out of business is not paying off in this particular location.
I live 100 miles away from Walmarts’ HQ in Bentonville, AR and I shop at the local Harps or CV’s Family Food because they are cheaper (after a multitude of price comparisons on multiple items!) The only area that Walmart is cheaper on is the fresh produce section where they have the occasional item much cheaper. Also their meats are gassed and kept up for sale far longer than Harps’ meat is not to mention that it is injected with sodium/protein solution of up to 30% of total weight! I greatly dislike paying $2-3.00 per lb. for 30% water. Not to mention that they buy from suppliers that use massive amounts of antibiotics and growth hormones on their animals.
All I use Walmart for is disposable household appliances and the occasional roustabout shirt or tee shirt…
Shopping at Walmart is like shopping anywhere else. Every store has the “lowest” price on something. It’s our job as consumers to compare prices and shop accordingly. As for Walmart in particular, they make a great bullseys because they put themselves out in the public eye more. The last time I checked this was not a socialistic country and companies are still free to manage themselves as they see fit as long as it’s not illegal or immoral. What we’re discussing here is ethics and everyone has there own point of view about what is ethically correct. If companies don’t want to comply to Walmart standards then they don’t have to stock there merchandise in there.